Risk of another global recession is "alarmingly high," IMF saysThe International Monetary Fund cut its projection for global economic growth this year to 3.3%, the lowest since the recession in 2009. The IMF said the chance of an even sharper decline, with growth falling as low as 2%, is "alarmingly high." The U.S. could slip back into recession if leaders fail to prevent a "fiscal cliff" of tax hikes and spending cuts from taking effect at year-end, the IMF said. Bloomberg
(09 Oct.), Google/Agence France-Presse
(08 Oct.), BBC
(09 Oct.)

Smaller core group of banks is setting LiborA smaller group of banks, including Bank of America, Lloyds Banking Group and Citigroup, is setting the London Interbank Offered Rate after the benchmark was manipulated. "You have a core group setting the rate, and that's a major concern," said Bret Barker of TCW Group. "It's going to be very tough to fix that and very tough to replace Libor." Bloomberg
(08 Oct.)

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Asset Allocation for a Non-Normal World
Prepare Your Portfolios for Extreme EventsClick here to read our article on “fat tails” published in the Financial Analysts’ Journal

Currency-options prices ease as economic waters are calmedAs central banks handle economic slowdown with quantitative easing, slackening demand has put a damper on currency-options prices, seen as a measure of expected volatility. "Foreign exchange options aren't likely to return to the very elevated levels seen in recent years," said David Gary, Deutsche Bank's head of foreign exchange derivatives for North America. "Instead, the market may see short-term, smaller jumps." The Wall Street Journal
(08 Oct.)

Analysis: Politicians' dithering brings global recession closerFailure of politicians in the U.S., Europe and China to demonstrate leadership on economic issues is driving the world toward another recession, according to The Economist. "Not all politicians are behaving irresponsibly. ... But in the world's big three economies, politicians are either dithering or doing damage," the magazine notes. The Economist
(06 Oct.)

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Geopolitical/Regulatory

Some nations are expected to miss Basel III deadlineAlthough progress is being made on Basel III implementation, a January deadline likely will be missed by some nations, including the U.S. and some in the EU, according to a report by the Basel Committee on Banking Supervision. Lawmakers are particularly challenged by requirements to triple core capital at banks. Bloomberg
(08 Oct.), Reuters
(08 Oct.)

Editorial: Financial advisers should prepare for money-fund rulesThe Financial Stability Oversight Council is likely to make important changes to the way money market funds work, or persuade the Securities and Exchange Commission to make those changes. Financial advisers should start preparing clients for them, according to this editorial. Some changes are almost certain to be adopted after Treasury Secretary Timothy Geithner wrote to the council asking for consideration of rules aimed at preventing a run on money funds, which could lead to another crisis. InvestmentNews (free registration)
(07 Oct.)

Law lets Congress members back legislation, then profit from itIn recent years, 73 members of Congress have backed legislation that could result in financial gain for industries or companies in which they or family members are involved or have money invested, according to a review by The Washington Post. The practice does not violate U.S. law or self-imposed ethics rules, the newspaper reported. The Washington Post
(07 Oct.)

Nationwide launches group fixed annuity for 401(k) plansNationwide Financial Services introduced a group annuity contract that qualifies for inclusion in 401(k) retirement plans, as well as several other group savings plans. Principal and interest payments of the Nationwide Fixed Select Contract are guaranteed by Nationwide Life Insurance. PlanAdviser.com
(04 Oct.)